Lithium resources and reserves at Bald Hill are expected to rise following a resource and exploration drilling program which recommenced in March 2019. The program is expected to be completed over 7 months. Photo: Company

Event: MarQ'19 production update Highlights:

Alliance Mineral

Share price:A$0.18

Target: A$0.35

• A40 reported MarQ spodumene concentrate production of 38kt, slightly ahead of CGe of 35kt. No detailed production statistics were reported, but we note management commentary that grades, throughput and recoveries were up QOQ.

Importantly, concentrate specifications continue to impress with grades of 6.1% Li20 and continued low impurities.

“Upcoming potential catalysts are expected to include finalisation of remaining offtake, potential reserve upgrades from resource drilling programs, and completion of the plant optimisation at Bald Hill in DecQ'19”

- Analysts Reg Spencer (photo) & Larry Hill

• Sales for the MarQ came in at 44kt, ahead of CGe of 42.5kt. Volumes reflected an expected reduction in concentrate inventory levels from the DecQ (18.8kt).

Impact on our view:• No detailed production data was reported but we are encouraged by management commentary around continued improvement in plant performance. Operating margins should remain impacted to a degree by strip ratios.

However, looking ahead, we expect the strip to fall over the course of 2019, with cash flow further boosted by improved concentrate volumes.

We further note that residual material under 2018 pricing was delivered in the MarQ, resulting in an estimated average price received of US$765/t.

• Upcoming potential catalysts are expected to include finalisation of remaining offtake, potential reserve upgrades from resource drilling programs, and completion of the plant optimisation at Bald Hill in DecQ'19 (which we estimate will lift annual production from 155ktpa to +220ktpa). Maintain SPEC BUY.